Dex, SuperMedia File for Bankruptcy to Complete Merger

March 18 (Bloomberg) -- Dex One Corp. and SuperMedia Inc.,
two money-losing phone book publishers, plan to merge by
returning to bankruptcy, about three years after each exited
court protection.

The merger will save Dex One, formerly known as R.H.
Donnelley Corp., and SuperMedia, formerly Idearc Inc., to save
as much as $175 million annually, Dex One General Counsel Mark
W. Hianik said in an affidavit filed today in U.S. Bankruptcy
Court in Wilmington, Delaware.

“The merger will enable the combined company to benefit
from improved operating scale, significant synergies and
enhanced cash flow,” Hianik said in the filing.

The companies filed separate Chapter 11 petitions in which
Dex One said it had $2.84 billion in assets and $2.79 billion in
debt, while SuperMedia said it had $1.4 billion in assets and
$1.9 billion in debt. SuperMedia lists billionaire John
Paulson’s Paulson & Co. as a shareholder.

Before the filings, the publicly traded companies had won
support for the merger from shareholders and almost all of their
lenders.

Supermedia had net income of $314 million in the 12 months
ended Sept. 30, after losing $967 million the previous two
years, according to information compiled by Bloomberg. Dex One
had income of $62 million in 2012 after losing $518 million in
2011.

Operating Losses

The companies will be able to use $1 billion in net
operating losses from Dex One to save about $400 million on
future income taxes, SuperMedia Chief Financial Officer Samuel
D. Jones said in court papers.

SuperMedia, based in Dallas, exited its previous bankruptcy
in December 2009, and Cary, North Carolina-based Dex One exited
the following month.

The combined company would have 5,800 employees. They
expect to exit bankruptcy within 60 days, they said in a
statement.

Among Dex One’s largest unsecured creditors listed in court
papers were holders of $219.7 million in senior subordinated
notes with Bank of New York Mellon as trustee; and Google Inc.,
owed $11 million in trade debt.

Unsecured creditors cited by SuperMedia included Google,
owed $3.74 million in trade debt; and Product Development Corp.,
owed $2.79 million.

2006 Spinoff

SuperMedia was formerly known as Idearc, a unit of Verizon
Communications Inc., before it was spun off in 2006.

SuperMedia’s business has been “impacted by a highly
competitive industry in the U.S.,” including newspapers, radio,
television, the Internet, billboards, direct mail,
telemarketing and other yellow pages directory publishers, said
Jones, the CFO for SuperMedia, in explaining the bankruptcy and
merger plans in court papers.

The cases are In re Dex One Corp, 13-10533, U.S. Bankruptcy
Court, District of Delaware. and In re SuperMedia Inc, 13-10545,
U.S. Bankruptcy Court, District of Delaware.